UK Royal Mail shares plan could cost Labour union funds

The Labour Party risks one of its biggest showdowns with the unions and the loss of an important source of funds if the Government announces plans to give Royal Mail workers shares in the postal group.

Royal Mail expects the Government to outline plans for Pounds 2 billion of state investment and an employee share ownership scheme as early as next week, when the group publishes its financial results.

Such a move could trigger the cutting of funds to Labour by the Communication Workers Union (CWU), which holds its annual conference the following week. The CWU gives more than Pounds 500,000 a year to Labour through affiliation fees and donates more for election campaigns.

The union and Labour backbenchers have voiced their opposition to the employee share scheme, which they view as the first step to privatisation. The union’s conference, which has the power to make decisions, will hear a call urging it to “suspend all funding to the Labour Party if there are measures proposed by the Government to privatise Royal Mail in any way. Funding shall be renewed only when the measure proposed is wholly defeated or withdrawn”.

A similar call at last year’s conference was defeated but it is believed that opposition will intensify in the face of concrete proposals.

Royal Mail is hoping to publish its results on May 18 but it could delay them if the Government is nearing a decision. However, a delay beyond the union’s conference, the main part of which is on May 21 and 22, will leave both sides open to the accusation that they have attempted to dodge union debate of the restructuring of Royal Mail.

Royal Mail’s annual profits are expected to trigger a bonus payment of Pounds 400 for each employee, although the headline profits could fall short of the Pounds 600 million which the organisation had said would release the bonus. It is expected that it will explain any disparity through accounting reasons. However, the union could accuse it of moving the goalposts in order to make the payout and soften up employees into saying they want shares in the business.

Both Royal Mail and the union are canvassing opinion on whether shares are wanted by the workforce. The idea faces tough political opposition, and 199 Labour MPs have signed an early day motion opposing anything except full public ownership.

The political dissent is important because any move to give staff a share in the business will require primary legislation.

Employee share ownership had been backed by Alan Johnson when he was Trade and Industry Secretary and the decision on the funding and future of Royal Mail now rests with the Treasury. However, Alistair Darling, the new Trade Secretary, could want an input and the Government’s recent political turmoil could force it to think twice about a showdown with its backbenchers.